On Monday, ABC News revealed confidential Treasury briefing notes which suggested that the government would need to raise taxes to curb the budget deficit.

Treasury briefing notes told Jim Chalmers that he would need to find “additional revenue and spending reductions” to achieve a “sustainable” budget, the ABC has reported.

David Montani, national head of technical tax at Grant Thornton, told Accounting Times that the Treasury advice simply highlighted Australia’s current fiscal situation.

“What that reflects is what everybody knows; the federal budget is in a structural deficit. That means that economic growth is not going to repair the budget. It's going to require policy change,” Montani said.

“The equation is rather simple. To arrest that structural deficit, you have to raise taxes, reduce spending, or both.”

Regarding the treasury leak, Treasurer Jim Chalmers said that he was “relaxed” about it, given that he had already flagged that tax reform ideas brought to the upcoming productivity roundtable must be budget-neutral or positive.

“People will come with all kinds of suggestions about how changing one tax over here will make it possible to cut taxes over there. That is, in lots of ways, the essence of the tax reform that a lot of people who will come to the roundtable are grappling with,” Chalmers said.

“I don’t think it’s particularly surprising that the Treasury has highlighted, as I have personally, that we need to do more to make the budget more sustainable.”

In recent months, Chalmers has signalled an intention to engage in broad-based tax reform as structural budget pressures loom.

This has been met with support from tax professionals, who have said that Australia’s system is overly reliant on income tax. Australia’s share of personal income tax revenue, at 51.6 per cent, is more than double the 2022 OECD average of 23.6 per cent, ATO 2022–23 tax statistics revealed.

The leaked treasury documents suggested that reforms to support budget repair could be implemented through the “indirect tax system,” which refers to a broad swathe of taxes including the fuel excise, stamp duty and GST.

Australia’s share of GST revenue, comprising 14.2 per cent of the total tax revenue according to 2022–23 ATO statistics, sits well below the OECD average of 20.75 per cent.

While some experts have called for GST reform, the government has appeared reluctant to touch the topic. Chalmers told the National Press Club in June that GST reform was “not a view that [he’d] been attracted to historically.”

Prime Minister Anthony Albanese echoed this sentiment on the grounds that the GST would impact lower-income earners already struggling with cost-of-living issues.

“I'm a supporter of progressive taxation, consumption taxes by definition are regressive in their nature, so that's something that doesn't fit with the agenda,” he told Sky News in early July.

Shadow finance minister James Paterson has flagged that the Liberal Party would be generally averse to the prospect of raising taxes.

“I am concerned that the Treasurer is possibly preparing the ground here for higher taxes,” Paterson told Sky News in June.

“We are up for a conversation with the government to work with them constructively to make our tax system more efficient, to collect revenues in ways that are less distortionary. But we are not going to give them a blank cheque to increase taxes on Australians.”

Montani said that the leak of the treasury briefing could hopefully serve as a “wake-up call” for the government, likening it to former treasurer Paul Keating’s famous ‘banana republic’ comments.

In the 1980s, Keating warned Australia that it risked becoming a ‘banana republic’ – or a third-rate economy – as low commodity prices, high government debt and high interest rates threatened to suffocate the economy. His comments spurred sharp fiscal discipline in the ensuing years.

“Perhaps this inadvertent release of that Treasury document could be viewed sort of like today's version of Keating’s 'banana republic' comments, in that it's a wake-up call,” Montani said.

“There's no getting away from the fact that the government spends too much relative to the revenue it raises.”